The debate between the supporters of capitalism and socialism has been going on for centuries and it was the primary factor behind the Cold War. The victory of U.S. in the Cold War as well as the relatively superior performance of capitalist countries has lend credibility to capitalism but the reality is not always white or black. Capitalism is indeed better than socialism but pure capitalist system may also be a recipe for disaster. The lessons from history demonstrate that the best economic system is not pure capitalism or pure socialism but a hybrid of both though with greater elements of capitalism.
The strongest supporters of capitalism often deride government involvement in the economy and believe that market forces are capable of monitoring themselves as well as correct any imbalances. One of these supporters during the last century was President Hoover on whose watch the first signs of the Great Depression of the 1930s appear. President Hoover had blind faith in the power of the free markets to recover and as a result, his administration refused government intervention in the economy (University of Illinois, Urbana-Champaign). It took the courage and wisdom of his successor President Roosevelt to help the nation eventually recover from the Great Depression because President Roosevelt believed government has important role to play in economy. His administration took several measures such as creating government agencies like SEC and FDIC and increasing government spending on infrastructure and industry-support programs (Miller Center, University of Virginia). Even the nation’s recovery during the recent financial crisis would not have happened without government support which bailed out some of the largest corporations whose failure could have led to systematic collapse of the economy. These events demonstrate that while capitalism is efficient, it is not without its shortcomings and government plays an important role in national economy. Thus, pure capitalism may seem ideal in theory, the reality is different and best economic system has elements of both capitalism and socialism.
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Capitalism is often applauded for more efficient allocation of resources and improving the overall well being of the society. While it may be true in most cases, it is not usually true in terms of public goods or where the potential for private gains is low even though the potential of society’s overall progress may be huge. Education is free in many developed countries like the U.S. and the education levels in any society play huge role in its long-term progress. But despite its great importance to the future of any society, it may not be provided more effectively under capitalism where the only ones with access to education may be those who can afford to pay for it. Healthcare is another great example of how sometimes capitalism is inferior to socialism. Universal healthcare system is being criticized by some as socialism and healthcare in the U.S. has mostly been managed by the private sector. Yet U.S. is behind countries with universal healthcare systems on certain quality of life measures despite greater per capita healthcare spending. The per capita healthcare spending in U.K. and France is half or less than that of the U.S. yet both countries claim higher average life expectancies than the U.S. (BBC). This is an example of how focus on only private gains harms the society’s progress in the long term.
It is clear that capitalism may be superior to socialism and the relatively greater progress of the capitalist countries is a proof. But even the most developed countries have not always enjoyed an easy ride because capitalism has its own shortcomings. Moreover, even capitalist countries provide certain goods and services through the public sector because the private sector would ignore the overall interests of the society. Similarly, the markets do not always do a good job of monitoring their own actions, thus, the best economic system is not pure capitalism or pure socialism but a hybrid of both.
- BBC. Healthcare around the world. 14 August 2009. 16 January 2014
- Miller Center, University of Virginia. Franklin Delano Roosevelt: Domestic Affairs. 16 January 2014
- University of Illinois, Urbana-Champaign. About the Great Depression. 16 January 2014
